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New Dimensions of Financial Liberalization in Japan

New Dimensions of Financial Liberalization in Japan Abstract This article contrasts the development of Japanese financial institutions over the past 50 years to that of the United States and compares the two countries' household savings behavior. Although reform and liberalization is driving the Japanese financial sector to become more open and more sophisticated, there are powerful reasons for the Japanese system and Japanese asset-holding behavior to remain divergent from that of the United States. One major factor is that income and wealth in Japan are distributed much more evenly than in the United States. Since wealthy households are more sophisticated and better able to accommodate risk, the concentration of wealth in the United States means that, compared to Japan, there are more high income/high wealth households that are willing to take on risk from equity and bond holdings. In Japan, in contrast, there is a much heavier reliance on bank deposits. Even though financial institutions in the two countries are becoming more similar, the persistent differences in income distribution are likely to lead to persistent differences in asset holding and the composition of capital markets in the two countries. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Business Economics Springer Journals

New Dimensions of Financial Liberalization in Japan

Business Economics , Volume 42 (2): 11 – Apr 1, 2007

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Publisher
Springer Journals
Copyright
2007 National Association for Business Economics
ISSN
0007-666X
eISSN
1554-432X
DOI
10.2145/20070205
Publisher site
See Article on Publisher Site

Abstract

Abstract This article contrasts the development of Japanese financial institutions over the past 50 years to that of the United States and compares the two countries' household savings behavior. Although reform and liberalization is driving the Japanese financial sector to become more open and more sophisticated, there are powerful reasons for the Japanese system and Japanese asset-holding behavior to remain divergent from that of the United States. One major factor is that income and wealth in Japan are distributed much more evenly than in the United States. Since wealthy households are more sophisticated and better able to accommodate risk, the concentration of wealth in the United States means that, compared to Japan, there are more high income/high wealth households that are willing to take on risk from equity and bond holdings. In Japan, in contrast, there is a much heavier reliance on bank deposits. Even though financial institutions in the two countries are becoming more similar, the persistent differences in income distribution are likely to lead to persistent differences in asset holding and the composition of capital markets in the two countries.

Journal

Business EconomicsSpringer Journals

Published: Apr 1, 2007

Keywords: economics, general; political economy/economic systems; business and management, general

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